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Enhancing Transparency in Political Donations: The Electoral Bonds Scheme

Last Updated on November 3, 2023 by News Desk


In a landmark case, the Supreme Court has recently delved into a rigorous examination of the Electoral Bonds Scheme, a government initiative aimed at revolutionizing political funding in India. As the nation grapples with the complex web of electoral financing, the court has posed critical questions regarding the scheme’s impact on transparency, potential for corruption, and its compatibility with the Constitution. The discussions, presided over by a Constitution Bench led by Chief Justice of India DY Chandrachud, offer a profound insight into the objectives, merits, and concerns surrounding the scheme.

The Quest for Transparency:

The debate began with a fundamental inquiry – how to ensure transparency in political donations and deter shell companies from contributing substantial sums to political parties? The Solicitor General (SG) emphasized that the scheme sought to promote clean money and reduce cash transactions in politics. However, the Chief Justice of India, CJI DY Chandrachud, pointed out a pivotal change brought about by the scheme. Earlier, companies could only donate 7.5% of their net profit over the last three financial years, but the scheme allowed any company, regardless of its profit or loss situation, to contribute. The SG justified this shift by highlighting past instances of companies creating shell entities to bypass the donation cap. This led to the elimination of the cap to discourage shell companies, and donors were given the freedom to decide the extent of their contributions.

Balancing the Equation:

CJI Chandrachud raised a critical question: why should a company be allowed to donate its entire profit, be it 1 Rupee or 100 Rupees, without any proportional limit? He argued that the previous cap was introduced for a legitimate reason – to prevent companies from becoming political financiers rather than conducting their core business activities. The SG, in response, cited the need to avoid shell companies and asserted that the removal of the cap aimed to disincentivize them.

The CJI probed further, asking whether it would be valid for a company to donate 100% of its revenue, questioning the underlying motives of such contributions. The SG underscored that the scheme’s objective was to curb shell companies and cash transactions, encouraging transparent donations.

Defending the Electoral Bonds Scheme:

The Solicitor General defended the scheme’s core objective of discouraging shell companies and promoting transparency. He elaborated on various safeguards embedded in the scheme, including designated accounts for donors and political parties and stringent Know Your Customer (KYC) requirements. The SG justified the 1% vote threshold for political party eligibility, aimed at preventing fake parties from exploiting the system. To address concerns about anonymous donations, he explained the KYC requirements, including Aadhar numbers and addresses. He also addressed concerns about potential aggregators, highlighting the system’s complexity, which required donors to engage with multiple aggregators for significant sums. While acknowledging potential misuse, the SG argued that no system could be entirely foolproof.

The Critical Element of Confidentiality:

Maintaining confidentiality emerged as a crucial aspect of the discussion. The SG argued that preserving donor secrecy was essential to prevent victimization and retribution by other political parties. However, Justice Gavai raised concerns about voters’ right to know, prompting the SG to assert that voters based their decisions on factors like ideology, principles, and party efficiency, rather than campaign contributions.

Assessing the Impact on Transparency:

The CJI raised five key considerations related to electoral financing: reducing cash reliance, promoting authorized banking channels for contributions, ensuring donor confidentiality, enhancing transparency, and preventing kickbacks. He stressed the importance of finding a balanced system that could address these factors without fostering opacity or misuse.

The Right to Informational Privacy:

The Solicitor General invoked the KS Puttaswamy judgment, highlighting the need to balance the right to know and the right to informational privacy. He argued that information disclosure should be limited to cases of genuine public interest, emphasizing the legitimate state interest in disclosure linked to public interest.

Rejoinder Submissions:

The debate continued with rejoinder submissions, focusing on the practical effectiveness of the scheme. Questions arose about the reduction of the income tax exemption limit and the potential for anonymous donations below 2,000 Rupees.

The CJI reiterated that the scheme’s primary objective was to enhance transparency by routing political contributions through regular banking channels.

The debate touched on concerns about potential corruption and the protection of companies donating to parties in power. The senior advocate Kapil Sibal criticized the scheme as unconstitutional, undemocratic, and unfair, alleging that it disproportionately benefited the ruling party.


The Electoral Bonds Scheme case serves as a pivotal moment in India’s quest for transparent political funding. The Supreme Court’s examination of the scheme’s merits and drawbacks underscores the nation’s commitment to preserving the integrity of the electoral process while addressing critical concerns regarding transparency, corruption, and the protection of donors. As this complex issue unfolds, the court’s deliberations will shape the future of political financing in India.

Written by — Athi Venkatesh

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